Silver price edged higher in early Monday trade before reversing most of the gains. Better-than-expected economic data from China was largely behind the recorded gains. Even so, a strong US dollar continues to weigh on the metal. Subsequently, it has not attracted enough buyers to break the critical resistance at $20.00.
Fundamentals
China’s GDP of Q3’22 beat economists’ expectations; an aspect that boosted silver price earlier in the day. According to the country’s Bureau of Statistics, the economy grew by 3.9% after dropping by 2.7% in the previous quarter. Analysts had forecast growth by 3.5%. Nonetheless, the 3.9% year-on-year growth is still below the official target of 5.5%. COVID restrictive measures heavily weighed on business activity, particularly during the year’s second quarter.
At the same time, exports – a key gauge of economic growth for the country – surpassed expectations by rising by 5.7%. Nonetheless, imports rose by 0.3% in September on a year-on-year basis compared to the analysts’ forecast of 1%. Besides, retail sales grew by 2.5% YoY; missing the forecast of 3.3%.
A look at the released Chinese economic data signalled that despite the observed recovery, the economy has continued to operate significantly below its potential. This explains why the positive data from China – the leading consumer of industrial metals – failed to yield a rally to the critical level of $20 for silver price.
Furthermore, as a precious metal, silver remains under pressure from a strong US dollar and concerns over the Fed’s aggressive rate hikes. Indeed, these bearish factors are the main reason why silver price has been on a persistent downtrend in recent months.
Silver price prediction
Silver price hit a two-week high earlier on Monday before pulling back. As at the time of writing, it was at 19.14 as the bulls strive to defend the critical support at 19.00 after yielding a rise above it on Friday.
As shown on its daily chart, the dual-status metal is hovering around the 25-day EMA while remaining below the 50-day EMA. Based on both the technicals and fundamentals, it will likely remain under pressure for the remainder of the week. In fact, I expect the probable gains to be curbed at the psychologically crucial level of 20.
In the short term, the range between 19.55 and 19.00 will be worth watching. A further decline may place the support for silver price at 18.90.
